This is part of the series of articles posting how China risen herself up from a poverty stricken weak nation to a wealthy strong super power nation.

Investing Human Capital

During the Cultural Revolution, China’s higher education system suffered. Deng Xiaoping’s policy put education back on course. He recognized the importance of education in turning China into a global, economic power. China is also spending more on research and development. Investing in knowledge skills and competencies will lead to an accumulation of human capital. When human capital in an economy is strong there ought to be positive spillover effects on labour productivity per person which contributes to higher trend economic growth. Stronger knowledge and skills will promote invention and innovation – two further ingredients of long-term growth. China’s Human capital spending start at an early age.

What is Early Childhood?

What happens – or doesn’t happen – to children in the earliest years of their lives is of critical importance, both to their immediate well-being and to their future. If you received the best start in your earliest years of life, you are more likely to have grown healthily, developed language and learning capacities, gone to school and led a productive, rewarding life. Yet millions of children around the world are still being denied the right to reach their full potential. Every child must be ensured the best start in life – their future, and indeed the future of their communities, nations and the whole world depends on it. Every year, tens of millions of infants around the world begin an extraordinary sprint – from defenceless newborns to becoming proactive young children ready for school. And every year, countless numbers of them are stopped in their tracks – deprived, in one way or another, of the love, care, nurturing, health, nutrition and protection that they need to survive, grow and develop. Nearly 10 million children die before their fifth birthday each year and over 200 million children are not developing to their full potential – solely because they and their caregivers lack the basic conditions needed for young children to survive and thrive [1].

The Chinese government increases investments in education, health care, student nutrition and early childhood development. People with higher levels of education are better able to absorb new ideas, adapt to foreign technologies, and understand and apply knowledge from outside China to local situations. The new technology being brought into China by its investment in physical capital requires more skilled workers to operate it. Capital and skill are complementary. Each factor raises the productivity of the other. China’s policies to foster human capital and promote economic growth strategies create national wealth. China encourages education and job training by subsidizing it. Creating incentives and allowing individuals and organizations to trade and to bargain in human capital and physical capital markets improves the educational infrastructure at no cost to government [2].

Human Capital is the stock of competencies, knowledge, social and personality attributes, includingcreativity, embodied in the ability to perform labor so as to produce economic value. Many theories explicitly connect investment in human capital development to education, and the role of human capital in economic development, productivity growth, and innovation has frequently been cited as a justification for government subsidies for education and job skills training. Human resource can be transformed into Human capital with effective inputs of education, health and moral values. The transformation of raw human resource into highly productive human resource with these inputs is the process of human capital formation. The problem of scarcity of tangible capital in the labour surplus countries can be resolved by accelerating the rate of human capital formation with both private and public investment in education and health sectors of their National economies. The tangible financial capital is an effective instrument of promoting economic growth of the nation. The intangible human capital, on the other hand, is an instrument of promoting comprehensive development of the nation because human capital is directly related to human development, and when there is human development, the qualitative and quantitative progress of the nation is inevitable [3].